Wage-led Growth pp 40-70
Why Have Wage Shares Fallen? An Analysis of the Determinants of Functional Income Distribution
In the last quarter century dramatic changes in income distribution have taken place. This refers to the personal distribution of income as well as to the functional distribution of income. Distribution has become more polarized in most OECD countries (OECD 2008, 2011), with the very top income groups increasing their income shares substantially in the Anglo-Saxon countries, in particular in the United States (Atkinson et al. 2011). Wage shares have fallen in virtually all OECD countries, with decreases typically being more pronounced in continental European countries (and Japan) than in the Anglo-Saxon countries. In the advanced economies1 the (adjusted) wage share has, on average, fallen from 73.4 in 1980 to 64.0 per cent in 2007 (Figure 2.1). The data for Germany are very similar (72.2 to 61.8); the decline is somewhat stronger in Japan (77.2 to 62.2) and a little weaker in the United States (70.0 to 64.9). Overall, real wage growth has clearly lagged behind productivity growth since around 1980. This constitutes a major historical change as wage shares had been stable or increasing in the post-war era.
Unable to display preview. Download preview PDF.
- Azmat, G., Manning, A. and Van Reenen, J. 2007. ‘Privatization, entry regulation and the decline of labour’s share of GDP: A cross-country analysis of the network industries’, CEPR Discussion Paper No. DP6348.Google Scholar
- Bentolila, S. and Saint-Paul, G. 2003. ‘Explaining movements in the labor share’, in Contribution to Macroeconomics, vol. 3(1) (Berkeley, CA: Berkeley Press).Google Scholar
- Duménil, G. and Lévy, D. 2004. Capital Resurgent: Roots of the Neoliberal Revolution (Cambridge, MA: Harvard University Press).Google Scholar
- Epstein, G. and Burke, S. 2001. ‘Threat effects and the internationalization of production’, Political Economy Research Institute Working Papers 15.Google Scholar
- Ertürk, L, Froud, J., Johal, S., Leaver, A. and Williams, K., (eds). 2008. Financialization at Work: Key Texts and Commentary (London: Routledge).Google Scholar
- European Commission. 2007. ‘The labour income share in the European Union’, Chapter 5 in Employment in Europe (Brussels: European Commission).Google Scholar
- Harrison, A. 2002. Has globalization eroded labor’s share? Some cross-country evidence. Mimeo, University of California, Berkeley.Google Scholar
- Hein, E. and Mundt, M. 2012. ‘Financialisation and the requirements and potentials for wage-led recovery — a review focussing on the G20’. Paper written for the project ‘New perspectives on wages and economic growth: the potentials of wage-led growth’.Google Scholar
- Hutchinson, J. and Persyn, D. 2009. ‘Globalisation, concentration and footloose firms: in search of the main cause of the declining labour share’, LICOS Discussion Paper Series, Discussion Paper 229/2009.Google Scholar
- International Labour Office (ILO). 2008. World of Work Report 2008: Income Inequalities in the Age of Financial Globalization (Geneva: ILO).Google Scholar
- International Labour Office (ILO). 2011. ‘The labour share of income: determinants and potential contribution to exiting the financial crisis’, Chapter 3 in World of Work Report 2011: Making Markets Work for Jobs (Geneva: ILO).Google Scholar
- International Monetary Fund (IMF). 2007a. ‘The globalization of labor’, Chapter 5 in World Economic Outlook, April 2007 (Washington, DC: IMF).Google Scholar
- International Monetary Fund (IMF). 2007b. ‘Globalization and inequality’, Chapter 4 in World Economic Outlook, October 2007 (Washington, DC: IMF).Google Scholar
- Organisation for Economic Co-operation and Development (OECD). 2007. ‘OECD workers in the global economy: increasingly vulnerable?’, Chapter 3 of OECD Employment Outlook 2007 (Paris: OECD).Google Scholar
- Organisation for Economic Co-operation and Development (OECD). 2008. Growing Unequal? Income Distribution and Poverty in OECD Countries (Paris: OECD).Google Scholar
- Organisation for Economic Co-operation and Development (OECD). 2011. Divided We Stand: Why Inequality Keeps Rising (Paris: OECD).Google Scholar
- Onaran, Ö. 2011. ‘Globalisation, macroeconomic performance and distribution’, in E. Hein and E. Stockhammer (eds), A Modern Guide To Keynesian Macroeconomics and Economic Policies (Cheltenham: Edward Elgar).Google Scholar
- Piketty, T. and Saez, E. 2007. ‘Income inequality in the United States, 1913–1998’, in A.B. Atkinson and T. Piketty (eds), Top Incomes in a Global Perspective (Oxford: Oxford University Press).Google Scholar
- Power, D., Epstein, G. and Abrena, M. 2003. ‘Trends in the rentier income share in OECD countries 1960–2000’, PERI Working Paper 58a.Google Scholar
- Rodrik, D. 1997. Has Globalization Gone Too Far? (Washington, DC: Institute of International Economics).Google Scholar
- Rodrik, D. 1998. Capital mobility and labor. Manuscript. Available online at http://ksghome.harvard.edu/~drodrik/capitalm.pdf.
- Rossman, P. 2009. ‘Financialization and casualization of labour — building a trade union and regulatory response’. Paper presented at the Global Labour University Conference, Mumbai, February.Google Scholar
- Stockhammer, E. 2009. ‘Determinants of functional income distribution in OECD countries’, IMK Studies 05–2009.Google Scholar
- Stockhammer, E. 2010. ‘Financialization and the global economy’, Political Economy Research Institute Working Paper 242.Google Scholar
- Stockhammer, E. 2013. ‘Why have wage shares fallen? A panel analysis of the determinants of functional income distribution’, Conditions of Work and Employment Series No. 35 (Geneva: ILO).Google Scholar
- Wolff, E. and Zacharias, A. 2007. Class Structure and Economic Inequality. Levy Economics Institute Working Paper No. 487.Google Scholar
- Wooldridge, J. 2002. Econometric Analysis of Cross Section and Panel Data (Cambridge, MA: MIT Press).Google Scholar
- AMECO: Annual macroeconomic database, Directorate General for Economic and Financial Affairs, (link to dataset http://ec.europa.eu/economy_finance/ameco/user/serie/SelectSerie.cfin, accessed 15 June 2011).
- Bassanini, A. and Duval, R. 2006. ‘Employment patterns in OECD countries: Reassessing the role of policies and institutions’, OECD Economics Department Working Papers 486. OECD Publishing.Google Scholar
- BGHS: Baker, D., Glyn, A., Howell, D. and Schmitt, J. 2005. ‘Labor market institutions and unemployment: a critical assessment of the cross-country evidence’, in D. Howell (ed.), Fighting Unemployment. The Limits for Free Market Orthodoxy (Oxford: Oxford University Press). Link: http://www.noapparentmotive.org/topics/BGHS_data.html.Google Scholar
- ILO/IILS: ILO/IILS data on wage shares, supplied by M. Charpe. Penn World Tables: Heston, A., Summers, R., Aten, B. 2011. Penn World Table Version 7.0. Center for International Comparisons of Production, Income and Prices, University of Pennsylvania, (link to dataset http://pwt.econ.upenn.edu/Downloads/pwt70/pwt70_06032011version.zip, accessed 25 May 2011).
- EU KLEMS: EU KLEMS Growth and Productivity Accounts: November 2009 Release, updated March 2011. (link to dataset http://www.euldems.net/index.htnil, accessed 17 July 2011).
- IMF, 2010. World Economic Outlook Database, October 2010. (link to dataset http://www.imf.org/extemal/pübs/ft/weo/2010/02/weodata/download.aspx, accessed 21 February 2011).
- IMF International Financial Statistics (IFS).Google Scholar
- Lane, RR. and Milesi-Ferretti, G.M. 2007. ‘The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970–2004’, journal of International Economics, vol. 73 (November), pp. 223–50 (link to dataset http://www.imf.org/extemal/pubs/ft/wp/2006/data/update/wp0669.zip, accessed 15 February 2011).CrossRefGoogle Scholar
- OECD: OECD.StatExtracts, http://stats.oecd.org/Index.aspx (accessed 18 April 2011).
- United Nations Statistics Division, 2011. National Accounts Official Country Data, UNData Explorer, (link to dataset http://data.un.org/Explorer.aspx?d=SNA, accessed 18 April 2011).
- UNIDO: INDSTAT3, Industrial Statistics Database (edition: 2006). (link to dataset http://dx.doi.org/10.5257/unido/indstat3/2006, accessed 18 April 2011).
- World Bank World Development Indicators (WDI). (link to dataset http://data.world-bank.org/data-catalog/world-development-indicators, accessed 15 February 2011).